Comptroller Sean Scanlon called a projected $6 million General Fund deficit “small” during an April 1 press conference following the release of his office’s monthly economic impact update and indicated upcoming consensus revenue forecasts will provide a clearer picture of whether it will have long-term fiscal impact.

Scanlon projected a $6 million General Fund deficit for fiscal year 2026, a decrease of $83.3 million from the previous month, and a Special Transportation Fund surplus of $47.4 million.

Both figures are in agreement with projections released by the Office of Policy and Management (OPM) in late March.

“While we never want to see a deficit of any size, it’s important to recognize how small—0.025% of the budget—this projected deficit is. Thanks to the progress we’ve made, the Governor and legislature have numerous ways to address this small gap, which was primarily caused by the corporate tax changes in President Trump’s Big Beautiful Bill and the challenges our larger businesses face in this volatile economy.” Scanlon said during the press conference.

On March 25, the Office of Fiscal Analysis (OFA) released monthly budget projections estimating a $29.8 million General Fund deficit. The previous month’s estimate projected a $19.2 million surplus.

The March projection was revised downward by $70 million, largely due to a $75 million downward adjustment to the corporation tax.

“This negative adjustment reflects ongoing weakness in collections within the corporation tax first recognized in March-April of 2025 and attributable at least in part to federal and state policies.” OFA stated.

According to Scanlon’s office, projected expenditure rose month-over-month by $8.3 million as a result of a $39 million shortfall driven largely by costs associated with state employee health services covered by the government. Scanlon said this was not reflected in projections the Office of Policy and Management sent in a letter to Scanlon last month because they are working to resolve the issue.

Scanlon said his office is paying most attention to consensus revenue forecasts due out later this month as an indicator of whether the projected deficit is a one-time issue or has longer-lasting implications.

According to the comptroller’s office monthly economic update, roughly 39 percent of the projected deficit is due to a decline in General Fund net revenue. A 2025 change to the federal corporate tax allowing for the immediate expensing of domestic research and development, along with higher tax refunds resulting from other federal tax changes, are also expected to reduce revenues.

An additional 61 percent of the decrease is the result of overspending.

Medicaid is projected to overspend by $85 million, accounting for nearly half of the $191.8 million projected overspending. Another $82 million comes from state employee and retiree healthcare spending, “mainly from higher utilization and prescription drug costs.”

The projected deficit also comes following an emergency bill, passed on the first day of the legislative session, that made permanent a $500 million emergency fund, taken from the state’s surplus, for use by Gov. Ned Lamont to respond to federal funding cuts and other “emergencies” that arise.

Scanlon’s press conference was held a day after the Appropriations Committee approved revisions to a budget implementer bill that increases year-over-year spending by 6.2 percent. The bill, which was approved on party lines, increased spending in a number of categories over recommendations put forward by Gov. Ned Lamont in the initial bill language.

Democrats on the Appropriations Committee approved $28.8 billion in spending for fiscal year 2027. If approved as currently written, it would put the state $16 million below the budget cap.

Areas where Democrats proposed spending over Lamont’s recommendations included an additional $31.4 million for primary and secondary education; an increase of $36.3 million in human services, including additional funding for Medicaid rates; and $8.9 million for the Department of Corrections and Judicial Branch, including funding for new positions for inmate medical services following the death of nine incarcerated individuals in the early months of 2026.

The Appropriations Committee also approved a separate bill to address projected budget deficiencies by making a $150 million payment to the Teacher Retirement Board. That funding would come from a proposed raising of the volatility cap, part of the state’s fiscal guardrails, to $650 million. Lamont’s initial budget proposal increased the volatility cap to $500 million. A Finance, Revenue and Bonding Committee proposal would raise it to $650 million, with the additional $150 million funding the payment to the Teacher Retirement Board. The move readjusts the spending cap calculation, allowing the budget implementer bill to fall $16.1 million below the limit.

Republicans have voiced oppositions to all those proposals.

“Democrats, through their Appropriations and Finance proposals, have again offered an initial budget that we know won’t balance, which means none of it actually counts. It’s press release fodder, not a plan. And when they do get around to addressing Connecticut’s real crises such as the property tax burden, education funding for municipalities, and our critical healthcare infrastructure, the answer will largely rest on raiding volatile, one-time revenues to slap a band-aid on problems that require surgery. That money won’t be there in the future, and the story started today ends with a financial mess for the next legislature and a headache that will dog taxpayers for years to come in the form of continued state agency overruns and more debt.” House of Representatives Minority Leader Vincent Candelora said in a statement released after the Appropriations Committee meeting.

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